metal is not the point

I’ve recently spent some time reading non-academic discussions of Marx’s theory of money on various online forums. I am not sure there is a nice way to say this, but it is a bit disappointing. There was much more metalism than I was hoping.

The problem is Volume 1. The appealing solution might be more Volume 3, but I think that is a mistake. Of course, real world finance is more prominent there, but the opening of Capital is where Marx most directly describes the relationship between value and money (including its various functions and forms). An interpretation of Volume 3, premised on metalist readings of Volume 1, is of little help here.

What is at stake for proponents of a metalist Marx? There is the ever-important specificity of Marxism. Theoretically abandoning commodity money, could be taken as abandoning Marx. There is also the specific fear that Marx himself articulated. Imaginary or symbolic theories of value (or money) may undermine more structuralist economic theories, by emphasizing the arbitrary decision of policy makers – “This is money. It is worth…”

The punchline of Lerner’s “Money as a Creature of the State” is that the state can manage its creation. The punchline of the Mengerian origin myth is that money is a creature of decentralized exchange – something that state can not manage. Given the prominence of money, as both an organizing aim and metonym, in a capitalist economy, questions of monetary ontology are almost always immediately questions of policy.

Nast’s (in)famous Milk Tickets (1876) :



Nast is certainly not on the same page as Lerner. The conceit of declaring something (or nothing) money by fiat, is on par with feeding a baby fiat milk. Money is properly a thing the way babies and milk are things. We know what would happen to a baby fed on fiat food, or a family living in a fiat home. Why would we want to live in an economy with fiat money?

The obvious counter is that money is not a thing just like babies and milk are things. The state should not declare something milk by fiat because milk is not essentially a creature of the state; it is a creature of…ummm…creatures. Simmel:

Only to the extent that the material element recedes does money become real money, that is a real integration and a point of unification of interacting elements of value, which only the mind can accomplish.

So, like Ron Paul, there is a privileged form of real money, but it is not necessarily something that would hurt your toe if you dropped it. Of course, if bruising toes was the essential function of money, we would indeed expect such a property. I am being silly, but with somewhat of a point. Hierarchies of monetary functions and hierarchies of monetary forms inform each other.

In the broadest possible sense, Marxian economics shares with the more libertarian right a skepticism of the management of capitalism. I think that is a good thing. My problem is the apparent notion that a commodity theory of money is necessary for this skepticism.

Speaking, once again, in very broad terms there is some similarity in the Mengerian and Marxian origin stories. In both cases money is generated out of an economic logic (as opposed to declared by authority). The big difference is that Menger’s logic is that of atomistic rational traders, and Marx’s is the contradictions of the capitalist commodity/economy. This is a huge enough difference that it might seem bizarre to even consider them together, but the point I want to stress is that both counter a liberal-reformist faith in policy. Menger’s rational individuals do not need help; the state can only get in the way. Marx’s capitalist economy is contradictory; there is nothing a state can do (under capitalism) to eliminate the tensions between use-value and exchange value, capitalist and worker, commodities and money, and so on.

Yes. Commodities and money. But isn’t money a commodity for Marx? How are they at odds? Sure, but remembering that commodities themselves are contradictory, the relationship between a commodity and the money commodity must be contradictory as well. Marx :

On the one hand, both sides of this opposition are commodities, hence themselves unities of use-value and value. But this unity of differences is expressed at two opposite poles, and at each pole in an opposite way. This is the alternating relation between the two poles: the commodity is in reality a use-value; its existence as a value appears only ideally, in its price, through which it is related to the real embodiment of its value, the gold…Inversely, the material of gold ranks only as the materialization of value, as money. It is therefore in reality exchange-value. Its use-value appears only ideally in the series of expressions of relative value within which it confronts all the other commodities as the totality of real embodiments of its utility.

There are two aspects of this passage that, in my view, move us away from a commodity (C) theory of money (M). Yes, despite all the gold and materialization stuff. First, C-M is a unity, but of “differences.” They share a contradiction, but manifest it in different ways. They are not independently real, but depend on each other for their realization (no matter how heavy they may be physically). Second, while the “material of gold” sounds quite metalist, it is not necessarily physicalist.

When Marx describes money as a measure of value, it is not necessarily the actual material of gold that immediately matters, but rather its image/ideal. Marx :

In its function as measure of value, money therefore serves only in an imaginary or ideal capacity. This circumstance has given rise to the wildest theories. But, although the money that performs the functions of a measure of value is only imaginary, the price depends entirely on the actual substance that is money.

The metalist wonders why I haven’t read the latter sentence, but I have. The imaginary might be immediately important, but it is ultimately determined by actual gold. And, of course without exchange neither the commodity nor money are realized:

To establish its price it is sufficient for it to be equated with gold in the imagination. But to enable it to render its owner the services of a universal equivalent, it must be actually replaced by gold.

At this point, we need to move to money as a means of exchange. Now money must appear. But not really. A symbol of money will do. For Marx, a metalic coin is symbolic money -like paper money – in disguise. So yes, Marx insists on the importance of the real substance of gold. In the last instance is it substantial money with weight is determinant, but we know long that wait can be. Money is essentially a measure of value, and as such must be actual gold. But actually, an image will do until the moment of exchange. Then we need actual money…or, a symbolic representation of money.

Marx’s last chance to champion real gold money is the section on “money as money.” The functions included here are (1) hoarding, (2) means of payment, and (3) world money. At this point, symbolic and imaginary moneys will not suffice. I don’t have space for a full analysis here but I want to make a few points intended to undermine the idea that this is a convincing case for metalism. In the section on money as a means of payment, Marx points out that when things are going well, real gold money is superfluous. Credits and debits suffice. It is only in a period of crisis, that a flight to “real quality” happens. But, even assuming some run to gold occurs, how does this give metal any privilege with respect to money’s other forms/function? The metalist interpretation here is a return of the real story. There is only so long we can make believe. Reality reasserts itself. But maybe this isn’t reality? If you assume gold is fundamental in some sense, then a boom in gold during crisis might well confirm your view. However, maybe Glen Beck ranting about Nazis and socialism and hyperinflation post-2007 is just madness. Someone really convinced about the importance of gold for value theory will not be satisfied here, but I want to move on and save a more serious critique of the “money as money” section for a future post if necessary.

But of course, no labor in our economy, no value. And if we are in a monetary economy (whatever that money is) and you are doing value theory you know the value of money. It will be determined by the amount of money in the economy, its velocity, and the total amount of socially necessary abstract labor time. It doesn’t matter whether money is gold, an accounting trick, or a fig newton. Instead of insisting on gold, we should consider what is at stake and insist on a Marxian analysis of these determinants of money’s value. Marx’s assumption of gold, when not fetishized, is instructive and helpful. Here are some of the things I think we should take away from Marx on money in Volume 1:

  1. Marx is trying to develop his particular theory of surplus value. Unequal exchange would just complicate matters in Volume 1, so let money be a commodity with value the way every other commodity has value. This way every C-M or M-C can simply be thought of an equal exchange.
  2. By making money a commodity he links its generation and insertion into the economy to the capitalist class process. This is important for Marx. But even if money were not immediately a commodity (just like others), we could still consider how capitalist class process and conflicts shape variables like money supply and the amount of output (in use-value or value terms) that determine the value of money.
  3. By making money a commodity he links its nature, and problems, to the nature and contradictions of the commodity. We see money. To many, it is the economy. A crisis is a lack of money. Thinking about money as (directly) constituted by the contradictions of commodities shifts the discourse from appropriate quantities of money stuff to the social relations of production. Again, this shift is just as important in a fiat money economy as it would be in a commodity money economy.
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